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One of, if not the most often-discussed issue facing Government contractors over the past few months has been the impending implementation of the Fair Pay and Safe Workplaces rule.

In brief, this rule, which was to come into effect Oct. 25, 2016, would have required contractors bidding on federal contracts to report “violations” of 14 distinct federal labor and employment statutes. Most notably, the rule would have permitted these disclosures to serve as the basis for disqualifying the contractors from the contracts. (A detailed discussion of the substance of the Fair Pay and Safe Workplaces rule can be found in our firm’s Oct. 12, 2016 client alert (link here).) To the collective – albeit temporary – relief of contractors, on Oct.24 the Fair Pay and Safe Workplaces rule was put on hold.

In a lengthy decision, U.S. District Court Judge Marcia A. Crone of the Eastern District of Texas blocked the implementation of the Fair Pay and Safe Workplaces rule when she issued a nationwide preliminary injunction on Oct. 24. Judge Crone’s decision was issued in response to a motion for a preliminary injunction requested by the Associated Builders and Contractors (“ABC”), a national trade organization supporting the construction industry. Finding that ABC had established a “likelihood of success on the merits” – not an easy bar to surpass at the preliminary stage of a proceeding – Judge Crone held that the Fair Pay and Safe Workplaces rule was preempted by other federal labor laws, violated contractors’ First Amendment and due process rights, violated the Federal Arbitration Act, and was arbitrary and capricious.

Judge Crone’s decision emphasized her concerns with the rule’s requirement that contractors disclose violations of labor laws given that often these “violations” are frequently non-final or administrative decisions that have not been subject to judicial review. As stated by Judge Crone: administrative merits determinations

“are nothing more than allegations of fault asserted by agency employees and do not constitute final agency findings of any violation at all.”

It is important to note that Judge Crone’s order was a preliminary injunction, meaning that it does not resolve the issues raised by ABC in its lawsuit. It is likely that in the coming weeks, the Government will appeal the order and a full hearing will be held on whether a permanent injunction is warranted.
Additionally, while the vast majority of the Fair Pay and Safe Workplaces act was enjoined pursuant to Judge Crone’s Order, a small portion of the rule — that requiring employee paychecks to reflect information relating to hours worked, compensation, and overtime– was unaffected by the ruling and remains scheduled to go into effect on Jan. 1, 2017.